Faculty & Research

In a recently accepted paper in Management Science, Dr. Amber Anand, professor of finance and Haydon Family Fellow, and his co-authors, Dr. Jian Hua (Baruch College) and Tim McCormick (U.S. Securities and Exchange Commission), examine the make-take structure, which compensates liquidity suppliers and charges liquidity demanders, in the options markets where it competes with a traditional structure which uses payments for order flow.

In the study, titled “Make-take structure and market quality: Evidence from the U.S. options markets,” the researchers use an event of the introduction of the make-take structure, to discover that execution costs (including fees) for liquidity demanders decline after the event for the affected options. They also find that the make-take structure encourages market makers to improve quoted prices; and that brokers change their routing behavior to include fees in the routing decision. The decline in execution costs is consistent with the benefits of the increased quote competition from the make-take structure prevailing over the fees the structure charges to liquidity demanders.

In a recently accepted paper in the Journal of Accounting and Economics, Dr. Craig Nichols, assistant professor of accounting, and his co-authors, Dr. Daniel Beneish (Indiana University) and Dr. Charles Lee (Stanford University), examine the role played by the supply of lendable shares in both equity price formation and returns prediction.

The researchers’ results show that the supply of lendable shares is frequently binding, and the constraint is related to firms’ accounting characteristics. They have three specific findings. First, controlling for expected borrowing costs and other determinants, a stock’s supply of lendable shares is a function of accounting variables associated with the types of stocks short sellers target. As a result, shares are least available when they are most attractive to short sellers. Second, when the lendable supply is binding (non-binding), short-sale supply (demand) is the main predictor of future stock returns. Third, abnormal stock returns to the short-side of nine well-known market anomalies are attributable solely to “special” stocks that generally have low supply and are hard to borrow.

Research by Todd Moss, assistant professor of entrepreneurship, has been accepted for publication by the Academy of Management Journal. The paper, titled “Cooperation vs. Competition: Alternative Goal Structures for Motivating Groups in a Resource Scarce Environment,” finds that competitive goal structures generally lead to higher levels of motivation within groups in a resource-scarce environment. Co-authors are Geoff Kistruck (York University), Robert Lount (Ohio State University), Brett Smith (Miami University) and Brian Bergman (Miami University).

Moss and his coauthors undertook a field experiment within a base-of-the-pyramid setting where resource scarcity is extremely high. Specifically, they collected data on 44 communities in rural Sri Lanka tasked with contributing a portion of their resources to the construction of a school building; 24 were assigned to a competition condition and 20 to a cooperation condition. The results, and subsequent follow-up interviews and focus groups, collectively suggest that competitive goal structures are more effective at motivating groups within a resource scarce environment. However, the results also suggest that cooperative goal structures can be highly motivating when groups are unfamiliar with one another, as cooperating with unfamiliar groups can provide access to valuable and rare knowledge within such settings.

Research by Lai Xu, assistant professor of finance, has been accepted for publication by the Journal of Financial Economics. The paper, titled “Tail Risk Premia and Return Predictability,” found empirical support for the idea that market fears play an important role in understanding the predictability of stock returns. Lai and her coauthors, Tim Bollerslev (Duke University) and Viktor Todorov (Northwestern University), show that much of the predictability of future stock market returns may be attributed to the variation over time of the extra compensation that investors demand for bearing the risk of sharp changes in the price of a stock from its current price (formally, the jump tail risk). Another novel aspect of the researchers’ work is their new, model-free (nonparametric) procedure for decomposing the variance risk premium.

A paper co-authored by Professor of Entrepreneurship Johan Wiklund and Professor Tom Lumpkin, The Chris J. Witting Chair in Entrepreneurship, has been selected to receive the 2015 Greif Research Impact Award. Given annually by the Greif Center for Entrepreneurial Studies at the University of Southern California, the award recognizes an entrepreneurship paper that appeared in the top-tier management and entrepreneurship journals six years ago and received the highest citations (based on the Social Sciences Citations Index) in the five years following publication.

In a paper recently accepted for publication in Contemporary Accounting Research, Lihong Liang, associate professor of accounting at the Martin J. Whitman School of Management at Syracuse University, found that shareholder participation improves financial reporting quality. Co-authors were William Barber (Georgetown University), Sok-Hyon Kang (George Washington University) and Zinan Zhu (National University of Singapore).

The paper, titled “External Corporate Governance and Misreporting,” analyzed external governance provisions, specifically those provisions that limit direct shareholder participation in the governance process. The researchers found that fewer restrictions on shareholder participation are associated with a relatively low incidence of accounting restatements.

Their paper, titled “Technical note – Price-setting newsvendor problems with uncertain supply and risk aversion,” explores how economic decisions are affected by supply uncertainty. The researchers found that when risk aversion is incorporated into the joint price and quantity decision under uncertainty, it does not create structural problems when the source of uncertainty is demand. However, risk aversion creates significant problems when the source of uncertainty stems from supply fluctuations. The authors develop a new elasticity measure that enables scholars to solve such complex problems. Managerially, their work finds that a firm will order more and price the commodity higher when the source of uncertainty is supply. The research builds on earlier studies that demonstrated that risk-averse firms price lower and order fewer items when the source of uncertainty is demand.

Research by Kris Byron, associate professor and chair of the department of management at the Martin J. Whitman School of Management at Syracuse University, has been accepted for publication by the Academy of Management Journal. The paper, titled “Women on Boards and Firm Financial Performance: A Meta-Analysis,” aggregated results from 140 studies, examining the relationship between a firm’s financial performance and female board representation. The co-author was Corinne Post (Lehigh University).

They found that having women on boards of directors is positively related to accounting returns. This relationship is more positive in countries that have stronger shareholder protections, which the researchers say could be due to the fact that shareholder protections can motivate boards to use the varied experience, knowledge and values each member brings to the board.

The findings show that, in general, no relationship between female board representation and market performance exists. However, in countries with high gender equality, there was a positive relationship; in countries with low gender parity, a negative relationship. “Societal gender differences in human capital may influence investors’ evaluations of the future earning potential of firms that have a higher number of female board members,” according to Byron.

In a recently accepted paper in Manufacturing & Service Operations Management, Dr. Burak Kazaz, the Laura J. and L. Douglas Meredith Professor of Teaching Excellence and associate professor of supply chain at Syracuse University’s Martin J. Whitman School of Management, and his co-authors, Dr. Tim Noparumpa (Syracuse Ph.D. ’12) and Dr. Scott Webster (Arizona State University, formerly Syracuse University), examine the impact of wine tasting experts and their reviews when it comes to selling wine before it is bottled, known as “wine futures."

Their research shows how to price wine futures, as well as what proportion of the wine should be sold in advance versus through retail chains. It demonstrates that Bordeaux grand cru wineries increase their profit by approximately 10%; they estimate that small and artisanal winemakers in the U.S. can benefit from such financial markets by improving their profits by 14-15%. This work is significant as it is perceived as the first of its kind in pricing wine futures. Earlier research thoroughly examines the pricing of bottled wine but has not explored a model for pricing wine not yet bottled.

Research by Susan Albring, associate professor of accounting in the Whitman School of Management at Syracuse University, has been accepted for publication by Management Science. The paper, titled “Does the Firm Information Environment Influence Financing Decisions? A Test Using Disclosure Regulation,” finds that the quality of a firm’s information environment impacts their choice between debt and equity financing within the context of Regulation Fair Disclosure (Reg FD). Co-authors are Monica Banyi (University of Virginia), Dan Dhaliwal (University of Arizona), and Raynolde Pereira (University of Missouri).

According to Susan, the goal of this work is to evaluate whether a firm's information environment impacts the choice between debt and equity financing within the context of Regulation Fair Disclosure (Reg FD), which prohibited the use of selective disclosure. The authors find that firms with high proprietary costs of public disclosure are more likely to use debt financing after Reg FD. They also evaluate changes in firm disclosure policy and find firms that adopted an expansive public disclosure policy are more likely to use equity financing. Overall, “the evidence is consistent with theory: firms with deteriorated firm information environments increase their use of less information-sensitive debt, while firms with improved information environments favor equity financing,” says Albring.

Research by Pamela Brandes, associate professor of management, Ravi Dharwadkar, professor of management, and SangHyun Suh, PhD (Whitman, 2009), at the Martin J. Whitman School of Management at Syracuse University, has been accepted for publication by the Strategic Management Journal. The paper, titled “I Know Something You Don’t Know! The Role of Linking Pin Directors in Monitoring and Incentive Alignment,” found that linking pin directors, those serving simultaneously on the audit and compensation committees, play an essential role in information exchange between board committees.

Using data from S&P 1500 firms, the researchers found linking pin directors are associated with lower executive compensation and influence pay mix. In studying the dynamics behind this process, they discovered that newly created linking pins improve monitoring effectiveness whereas recently dissolved linking pins decrease it. The researchers also found that linking pins are all the more important when managers make less conservative accounting choices.